There are many strategies that a company can employ in establishing a sustainable growth plan, and there are some, as Jeremy Goldstein states, that have the potential to end up being a loss for both the company’s shareholders and the employees. Some companies use the Earnings per Share (EPS) as an incentive to employees, which, generally is a positive thing. It has, to some extent, proved as a way of adding value to the employees and the company’s stock and shareholders in general.
The EPS indicates the health of a company as at that moment. For shareholders, it is a crucial determinant for them, and it enables them to know whether to buy or sell their shares judging by the rise and fall of the EPS. It is also one of the most significant determinants of a company’s stock price. Therefore, there is a need to ensure that it gets appropriately managed.
However, as Jeremy Goldstein notes, use of the EPS can hurt a company. Given that the EPS points on the performance within the company at a particular time, its value may lead to a skewed analysis of the CEO of the firm. It may lead to turning a blind eye to the long-term goals that the CEO has put in place to assure of the company’s futures growth. It may not focus on how the company is reinvesting its profits to ensure that there will be profitability even in the long term rather than just to boost the EPS in the short-term.
The recommendation Jeremy Goldstein gives is that we can take a compromise between these positions of EPS crusaders and opponents. He suggests that the performance-based incentive should still be in place, but there ought to be new measures to evaluate the performance of CEOs in their long-term plans and growth within the company, which ensures sustainability and continued profitability and value for employees and shareholders.
Jeremy Goldstein is an attorney at law, practicing in New York City. He is a partner at Jeremy L. Goldstein & Associates, a company which specializes in providing a professional advisory opinion to committees and CEO management teams about executive compensation plans. He started his law firm after practicing in many large companies over many years.
Goldstein is a graduate of New York University School of Law, where he got his Doctor of Jurisprudence. He has many years of experience in the field of business law and with a specialty in corporate compensation. During his years of practice, Jeremy Goldstein has worked with some of the most prominent corporations such as Verizon, AT&T, JP Morgan Chase, among others.
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